What Are CSR Payments?

The Affordable Care Act set up a system where the government helps people with low incomes afford insurance. One way was by expanding Medicaid. Two other types of payments help people who buy their own insurance on the individual market:

Cost-sharing reduction (CSR) payments go to insurance companies, and in exchange the insurer offers you a plan with lower copays and deductibles.

I know, I know, you already think your premiums and deductibles are too high. But without these subsidies, they would be even higher.

What Happens Without CSR Payments?

Without the payments, insurers would have to raise premiums to be able to offer the same plan with the same copays and deductibles. So this means pricier insurance for you. Or, if you qualify for premium tax credits, your premiums will stay the same because the government pays the difference. (Remember, for all the efforts to pass a Trumpcare bill, the ACA is still in effect for the foreseeable future.)

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But our president has repeatedly threatened not to pay the CSRs, hinting that insurance markets will “implode” without them, and the resulting chaos will solve the deadlock in Congress.

Your insurance rates for this year are already locked in, but what happens in 2018? Insurance companies have to request rate hikes from regulators, and they tacked on some pretty big numbers to account for the uncertainty in whether CSRs would be paid. One analyst who has been crunching the numbers calls it a “Trump tax” and breaks down the requested increases this way:

What Happens Now?

The Trump administration agreed to pay the August CSR payments, so nothing terrible will happen today, or tomorrow. But we don’t yet have any promises about whether they will pay the CSRs in 2018, and that’s still a problem as you’re budgeting for next year’s insurance. Remember, rates always increase, no matter what law is on the books, because medical care gets more expensive all the damn time, and we have zero checks and balances on that. But without CSRs, those high numbers will get even higher.

The CBO does not think the marketplace would fall into shambles if these payments were withheld. Instead, it would hobble along with higher prices and less competition. And, in a weird twist, the move would actually cost the government $194 billion over the next decade.

Insurers have until September 6 to finalize their rates for next year, and there are a lot of other dramatic events and deadlines that will fill you with thrills and suspense as you wait to see whether you’ll be able to afford insurance next year. Enjoy!